How Starbucks Plans To Grow Its International Operations

Summary

Starbucks has a strategy in place to expand its international operations.

The company believes that China represents its most important and exciting opportunity, with the potential of becoming its largest market.

It's also bullish on India, despite slow growth in the country with only opening 75 stores in three years.

With a goal to open 500 new stores in China in 2016, bringing its specialty tea brand Teavana to India, and entering the China e-commerce market, Starbucks (NASDAQ:SBUX) seems to have a strategy in place to expand its international operations. [1] [2] While the company believes that China represents its most important and exciting opportunity with the potential of becoming its largest market, it's also bullish on India, despite a slow growth in the country with only opening 75 stores in three years. We believe global expansion would be one of the key growth drivers for the company and it appears to be on track to meet its international expansion targets.

Innovation To Improve Customer Experience In China

Since its launch in China, Starbucks has ensured that it adapts itself to the local environment and this strategy has been instrumental to its growth in the region. The company continues to do so as part of its ambitious expansion plans in China. Given the popularity of digital technology and e-commerce in China, the company plans to build locally relevant Starbucks 4th-place Experience that seamlessly blends its store experience with the digital space. It is exploring strategic partnerships to implement digital innovations in China [3]. The company also opened its e-flagship store in Alibaba's Tmall (B2C platform) which provides a social gifting option to its Chinese customers. Starbucks claims that its e-store on Tmall registered more than 300,000 fans and became the top performing brand in Tmall's "Food and Beverage" category in the first month [3]. The company also is focusing on its "Reserve" stores in China which are specialized experience stores, highlighting rare and exquisite coffees that are available in limited quantities globally. These initiatives are aimed toward capturing a higher market share in the region and the company appears to be on target to reach 3,400 stores in China by 2019.

Tapping The Growing Indian Market

With the Indian economy witnessing high single-digit growth, Starbucks sees a huge opportunity in the growing middle class with higher disposable income in the country. While the company faces intense competition in India from coffee chains such as Café Coffee Day, which had nearly 1,500 stores in December 2014, the overall café market in India is valued at $1.1. billion, of which the chain café market is worth nearly $300 million [4]. Although it operates only 75 stores in India in partnership with a local player, Tata Global Beverages, Starbucks believes that India is its fastest growing market. The company plans to bring its consumer packaged goods, along with its specialty tea brand, "Teavana," to India. Given that India is predominantly a tea-drinking nation, launch of Teavana in the country could help Starbucks gain customers in the region. It also will benefit by bringing its mobile and digital technology to India as mobile order and pay can reduce long queues in the densely populated urban areas of the country, thus providing Starbucks with a competitive edge.

As the urban middle class population rises in China and India, Starbucks' initiatives in these regions appear to be in line with its international expansion plans.